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Europe needs fair and transparent debt work-out mechanisms: lessons from the Icelandic case

Datum: 17-06-2010

De ETUI (the European Trade Union Institute) heeft een beleidsbrief over IJsland gepubliceerd, die Jubilee Nederland samen met Eurodad-partners heeft opgesteld.

Samenvatting

Debt diiculties currently faced by Iceland and other European countries give rise to new debates among European decision-makers on how to identify causes and responsibilities in the context of sovereign debt crises and how to ind eicient solutions to the problems arising. There currently exists no orderly procedure to ensure an eicient and fair solution to sovereign debt diiculties. The lack of such procedure is costly both to the country in question – and most importantly, to the country’s most vulnerable social sectors – and to its creditors. An insolvency procedure needs to be set up to deal with sovereign debt disputes. The procedure must be independent, fair and comprehensive, treating all creditors equally. A debt work-out mechanism is needed which assesses the underlying causes of the distressed debt, taking creditors’ responsibilities into account. Only by holding creditors, as well as borrowers, to account for irresponsible behaviour could new debt crises be avoided.

Download de beleidsbrief hier

 

Dear Sir or Madam,
Dear colleague,

Sovereign debt and balance of payments crises were long thought to be the bane of developing countries, but not an issue for advanced economies. The economic and financial crisis has shattered that belief. Even before the current spate of fiscal crises among euro area countries, Iceland faced a debt crisis following the implosion of its banking system. This, the second ETUI Policy Brief European Economic and Employment Policy in 2010, considers the lessons to be drawn from Iceland's experience. The authors, all with links to EURODAD, The European network on Debt and Development, draw on their experience with debt issues in the developing-country context.

The starting point is that there currently exists no orderly procedure to ensure an efficient and fair solution to sovereign debt difficulties. This is costly both to the country in question and to its creditors. An insolvency procedure needs to be set up to deal with sovereign debt disputes that is independent, fair and comprehensive, treating all creditors equally. A debt work-out mechanism is needed which assesses the underlying causes of the distressed debt, taking creditors' responsibilities into account. Only by holding creditors, as well as borrowers, to account for irresponsible behaviour can new debt crises be avoided.

I do hope that you find the Policy Brief useful for your work and of interest for the political and academic debates facing Europe, all the more so in the current environment of economic crisis.
If you do not want to receive it any more, an email to me with UNSUBSCRIBE in the subject line suffices. We try and keep our distribution list up to date. Please let us know of any change in your contact details and especially your e-mail address. We welcome your comments, criticisms and proposals for articles; proposals should be short (2-3000 words), policy-oriented contributions to current economic and employment issues in Europe.

Sincerely

Andrew Watt

Editor of the ETUI Policy Brief - European Economic and Employment Policy
Senior researcher
European Trade Union Institute
awatt@etui.org

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